Question 1

An advantage of the weighted-average inventory method is that it tends to smooth out the effects of price changes.

Accepted Answer

A) True 
 B)False

Question 2

Not many companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.

Accepted Answer

A) True 
 B)False

Question 3

A company uses a weighted-average perpetual inventory system. August 2: 10 units were purchased at $12 per unit.
August 18: 15 units were purchased at $15 per unit.
August 29: 20 units were sold.
August 31: 14 units were purchased at $16 per unit.
What is the per-unit value of ending inventory on August 31?

Accepted Answer

A)  $12.00 
B)  $13.80 
C)  $15.42 
D)  $16.00 
E)  $17.74 
A)  $12.00 
B)  $13.80 
C)  $15.42 
D)  $16.00 
E)  $17.74

Question 4

LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.

Accepted Answer

A) True 
 B)False

Question 5

Under LIFO, the most recent costs are assigned to ending inventory.

Accepted Answer

A) True 
 B)False

Question 6

Match between columns
                        Premises: The accounting principle that aims to select the less optimistic estimate when two or more estimates are about equally likely.
A method for estimating an ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail price.
The expected sales price of an item minus the cost of making the sale.
An inventory valuation method that assumes that inventory items are sold in the order acquired.
The number of times a company's inventory is sold during a period.
An inventory valuation method where the purchase cost of each item in ending inventory is identified and used to determine the cost assigned to inventory.
Financial statements prepared for periods of less than one year.
An inventory valuation method that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold.
An inventory pricing method that assumes the unit prices of the beginning inventory and of each purchase are weighted by the number of units of each in inventory; the calculation occurs at the time of each sale.
An estimate of days needed to convert the inventory at the end of the period into receivables or cash.

Accepted Answer

The Answer of Interim statements and Inventory turnover and LIFO is...

Question 7

A company made the following merchandise purchases and sales during the month of May:
 $\begin{array}{|l|l|l|l|}
\hline \text { May 1 purchased } & 380 & \text { units at } & \$ 15 \text { each } \
\hline \text { May 5 purchased } & 270 & \text { units at } & \$ 17 \text { each } \
\hline \text { May 10 sold } & 400 & \text { units at } & \$ 50 \text { each } \
\hline \text { May 20 purchased } & 300 & \text { units at } & \$ 22 \text { each } \
\hline \text { May 25 sold } & 400 & \text { units at } & \$ 50 \text { each } \
\hline
\end{array}$ There was no beginning inventory. If the company uses the weighted-average periodic method, what would be the cost of the ending inventory?

Accepted Answer

@#IMG-DLM& Average cost = $16,890/950 un

Question 8

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

Accepted Answer

A) True 
 B)False

Question 9

An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

Accepted Answer

The answer of An advantage of the _________________ method of...

Question 10

A company made the following merchandise purchases and sales during the current month:
 $\begin{array}{|l|l|l|l|}
\hline \text { July 1 purchased } & 380 & \text { units at } & \$ 15 \text { each } \
\hline \text { July 5 purchased } & 270 & \text { units at } & \$ 20 \text { each } \
\hline \text { July 9 sold } & 500 & \text { units at } & \$ 55 \text { each } \
\hline \text { July 14 purchased } & 300 & \text { units at } & \$ 24 \text { each } \
\hline \text { July 20 sold } & 250 & \text { units at } & \$ 55 \text { each } \
\hline \text { July 30 purchased } & 250 & \text { units at } & \$ 30 \text { each } \
\hline
\end{array}$ There was no beginning inventory. If the company uses the last-in, first-out perpetual inventory system, what would be the cost of the ending inventory?

Accepted Answer

The answer of A company made the following merchandise purchases...

Question 11

A company has the following per unit original costs and replacement costs for its inventory: Part A: 10 units with a cost of $3 and replacement cost of $2.50.
Part B: 40 units with a cost of $9 and replacement cost of $9.50.
Part C: 75 units with a cost of $8 and replacement cost of $7.50.
Under the lower of cost or market method, the total value of this company's ending inventory must be reported as:

Accepted Answer

A)  $990.00. 
B)  $947.50. 
C)  $967.50 or $947.50, depending upon whether LCM is applied to individual items or the inventory as a whole. 
D)  $967.50. 
E)  $990.00 or $947.50, depending upon whether LCM is applied to individual items or to the inventory as a whole. 
A)  $990.00. 
B)  $947.50. 
C)  $967.50 or $947.50, depending upon whether LCM is applied to individual items or the inventory as a whole. 
D)  $967.50. 
E)  $990.00 or $947.50, depending upon whether LCM is applied to individual items or to the inventory as a whole.

Question 12

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold and does a better job of matching current costs with revenues on the income statement.

Accepted Answer

A) True 
 B)False

Question 13

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

Accepted Answer

Each purchase of merchandise is debited

Question 14

If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when goods are loaded on the transport vehicle.

Accepted Answer

The answer of If the _______________ is responsible for paying...

Question 15

The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory costing.

Accepted Answer

A) True 
 B)False

Question 16

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

Identify the inventory valuation method that is being described for each situation below. In all cases, assume a period of rising prices. Use the following to identify the inventory valuation method:
 $\begin{array}{|l|l|}
\hline \text { FIFO } & \text { First in, first out } \
\hline \text { LIFO } & \text { Last in, first out } \
\hline \text { SI } & \text { Specific identification } \
\hline \text { WA } & \text { Weighted average } \
\hline
\end{array}$ a. The method that can only be used if each inventory item can be matched with a specific purchase and its invoice.
b. The method that will cause the company to have the lowest income taxes.
c. The method that will cause the company to have the lowest cost of goods sold.
d. The method that will assign a value to inventory that approximates its current cost.
e. The method that will tend to smooth out erratic changes in costs.

Accepted Answer

a. SI; b.

Question 18

Given the following items and costs as of the balance sheet date, determine the value of Light Company's merchandise inventory. - $2,000 goods sold by Light to another company. The goods are in transit and shipping terms are FOB shipping point.
- $3,000 goods sold by another company to Light. The goods are in transit and shipping terms are FOB shipping point.
- $4,000 owned by Light but in the possession of another company, the consignee.
- Damaged goods owned by Light that originally cost $5,000 but now have an $800 net realizable value.

Accepted Answer

A)  $7,000 
B)  $7,800 
C)  $9,800 
D)  $9,000 
E)  $6,800 
A)  $7,000 
B)  $7,800 
C)  $9,800 
D)  $9,000 
E)  $6,800

Question 19

To avoid the time-consuming process of taking an inventory each year, the majority of companies use the gross profit method to estimate ending inventory.

Accepted Answer

A) True 
 B)False

Question 20

A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory.
 $\begin{array}{|l|l|}
\hline \text { January 1: } & \text { Purchased } 100 \text { units at } \$ 10 \text { per unit } \
\hline \text { February 5: } & \text { Purchased } 60 \text { units at } \$ 12 \text { per unit } \
\hline \text { March 16: } & \text { Sold } 40 \text { Units for } \$ 16 \text { per unit } \
\hline
\end{array}$ Prepare general journal entries to record the March 16 sale using the FIFO inventory valuation method.

Accepted Answer

The answer of A company that uses a perpetual inventory...

An advantage of the weighted-average inventory method is that it tends to smooth out the effects of price changes.

Not many companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.

LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.

Under LIFO, the most recent costs are assigned to ending inventory.

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold and does a better job of matching current costs with revenues on the income statement.

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when goods are loaded on the transport vehicle.

The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory costing.

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

To avoid the time-consuming process of taking an inventory each year, the majority of companies use the gross profit method to estimate ending inventory.

Introducing Financial Accounting

Accounting for Transactions

Preparing Financial Statements

Accounting for Merchandising Operations

Accounting for Cash and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Accounting for Equity

Accounting for Cash Flows

Interpreting Financial Statements

Time Value of Money

Investments and International Operations

Accounting for Partnerships

Accounting With Special Journals

Filters

Exam 5: Accounting for Inventories

An advantage of the weighted-average inventory method is that it tends to smooth out the effects of price changes.

Not many companies take a physical count of inventory each year as they rely primarily on inventory records alone to determine the inventory value.

LIFO inventory value is often less than the inventory's replacement cost because LIFO inventory is valued using the oldest purchase cost.

Under LIFO, the most recent costs are assigned to ending inventory.

The retail inventory method estimates the cost of ending inventory by applying the gross profit ratio to net sales.

An advantage of the _________________ method of inventory valuation is that it tends to smooth out the effect of erratic changes in costs.

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold and does a better job of matching current costs with revenues on the income statement.

Discuss the important accounting features of a periodic inventory system including accounts and procedures used.

If the _______________ is responsible for paying the freight, ownership of merchandise inventory passes when goods are loaded on the transport vehicle.

The full disclosure principle requires that the notes to the financial statements report a change in accounting method for inventory costing.

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

To avoid the time-consuming process of taking an inventory each year, the majority of companies use the gross profit method to estimate ending inventory.

Introducing Financial Accounting

Accounting for Transactions

Preparing Financial Statements

Accounting for Merchandising Operations

Accounting for Cash and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Accounting for Equity

Accounting for Cash Flows

Interpreting Financial Statements

Time Value of Money

Investments and International Operations

Accounting for Partnerships

Accounting With Special Journals

Filters